AAVE plummets 18% amid L2 governance cutbacks

On FEB 5 2026, AAVE dropped by 18.4% within 24 hours to $100.97, with a 21.75% decline in the last 7 days, marking one of the largest corrections in recent memory. The token has also fallen 30.85% year-to-date. The drop comes amid a key governance proposal from the Aave Chan Initiative (ACI), the protocol’s governance delegation platform, which seeks to pause three underperforming Layer 2 (L2) deployments of Aave V3.

Governance Proposal Seeks to Cut Costs on Underused L2s

On Jan. 29, the Aave Chan Initiative (ACI) submitted a governance proposal to pause deployments on zkSync Era, Metis, and Soneium, citing insufficient user activity, total value locked (TVL), and revenue. The proposal, which moved to a snapshot vote on Feb. 3, argues that these L2s do not justify the operational and governance burden they impose. ACI emphasized that these networks “contribute very little” to Aave’s ecosystem while requiring continuous monitoring and maintenance.

The snapshot vote, which concludes on Feb. 7, has received 257,300 votes in favor with no votes against, indicating broad support. The proposal outlines that any new chain deployment should guarantee at least $2 million in annual revenue for Aave, reflecting the protocol’s growing emphasis on financial efficiency and long-term sustainability.

Financial Performance of Proposed L2 Pauses

According to DefiLlama data, zkSync currently holds the highest TVL among the three at $26 million, followed by Soneium at $21.6 million and Metis at $11.7 million. Despite these figures, the revenue generated by these chains is minimal: $714 on zkSync, $679 on Metis, and only $150 on Soneium over the past 30 days. In comparison, Aave earned $7.7 million on Ethereum and $298,000 on Base in the same period.

ACI’s proposal highlights that the “upfront and recurring costs” of maintaining these L2s are not justified by their returns. The decision to pause these deployments is expected to reduce operational overhead, streamline governance participation, and free up capital for more viable expansion opportunities.

Aave’s Governance Model Under Scrutiny

The proposal reflects a growing trend in the DeFi space to optimize resource allocation and realign governance priorities. Aave, with over $29 billion in TVL, is one of the largest and most influential protocols in the space. As such, its governance decisions carry wide-reaching implications for both the Aave community and the broader DeFi ecosystem.

Analysts have noted that this move could set a precedent for other DeFi protocols, especially those with fragmented or underused deployments. By enforcing financial thresholds for new chain integrations, Aave aims to avoid dilution of its core value proposition and ensure that future expansions are economically sustainable.

Market Implications and Future Outlook

The timing of the proposal is notable, as the broader Ethereum L2 landscape is under increased scrutiny. Ethereum co-founder Vitalik Buterin recently questioned the viability of the current L2-centric roadmap, suggesting that L2s should explore alternative use cases beyond scaling. This debate is likely to influence future governance decisions across Ethereum-based protocols.

For now, Aave’s move is seen as a pragmatic response to market realities, aligning with the broader trend of DeFi projects reevaluating their L2 strategies. If the proposal passes, the pause will likely be temporary, with the option to revisit the chains in the future should their financial viability improve.

As Aave navigates this strategic shift, the market will be watching closely to see whether it can maintain its leadership position while adapting to a more selective and financially disciplined expansion model.